REACH and a no-deal Brexit
Dave Gordon and Anita Lloyd, partner and director at Squire Patton Boggs, look at the legal issues relating to a proposed ‘UK REACH’ system in the event of the UK leaving the EU without a deal
As REACH is currently ‘directly applicable’ in the UK, there is no UK implementing legislation, except in relation to enforcement. Under the EU Withdrawal Act, EU Regulations are direct EU legislation, which will become part of UK law on exit day. Under an agreed Brexit, REACH would continue to apply in the UK, and it would continue to use the European Chemicals Agency (ECHA) system for the transitional period at least - and potentially thereafter as an associate member.
However, in the event of a no-deal Brexit, the UK would have no pre-existing registration system on which to manage and regulate its own ‘UK REACH’. The UK government and the Health & Safety Executive (HSE), its competent authority for REACH, have issued guidance on how UK REACH would operate in the event of a no-deal Brexit, with effect either from 30 March or the end of the transitional period. The government has built an IT system, UK REACH-IT, that will perform the equivalent function to ECHA’s REACH-IT platform.
There are complex consequences for chemical companies and supply chains, both for UK companies wishing to retain EU-27 market access and for any companies wishing to do business in the UK. This article focusses on selected aspects of UK REACH ahead of an expected UK statutory instrument on chemical regulation.
REACH & supply chains
REACH works on a ‘whole supply chain’ basis. Companies at the top often have registrations and authorisations that benefit those lower down the chain EU-wide. With a no-deal Brexit, all registrations and authorisations held by UK companies - and potentially relied upon by many others elsewhere - will become invalid.
UK companies wanting to continue supplying into the EU will need to transfer their registrations to EU-based companies, or rely on their customers making ‘importer’ registrations. This sort of transfer is not foreseen in the REACH text, and there are timing issues, due to the need to maintain existing registrations up to the time of exit. Without careful management, there could be serious ramifications down the supply chain and serious interruptions to trade.
To keep supply chains open, UK manufacturers and importers will also need to make equivalent registrations under UK REACH to those they held under REACH. Non-UK companies active in the UK will also need to consider their status under UK REACH and whether they wish to appoint an only representative (OR) to register instead of their UK importer. If this whole process does not operate smoothly, without substantial duplication of effort and cost, EU-27 companies that have purchased from UK companies may look elsewhere for their supplies.
UK REACH: legal issues
UK-based manufacturers, importers and ORs who have held REACH registrations up two years prior to exit date will be entitled to have these ‘grandfathered’ into UK REACH. They need to enter some basic substance information into UK REACH-IT by 29 May 2019 and submit a full registration dossier by 29 March 2021. No registration fee will apply.
The main legal issue for these companies is whether they already own or have full access to the data they will later need to submit a full UK REACH registration. They may also have concerns about maintaining EU market access and need to take action under REACH as well. UK-based companies importing chemicals from within the EU-27 did not previously need a REACH registration, as they were downstream users. However, they will be classed as ‘importers’ under UK REACH and will need to make sure the substances they import are registered.
There are several options for importers. One is registering under UK REACH as an importer and notifying UK REACH-IT by 26 September 2019, followed by a full registration by 29 March 2021. By making the notification, the importer benefits from a two year exemption before it needs to submit a full registration. Access to data, could, however be a major issue if the company has not previously been involved in REACH registration.
A second is asking their EU supplier to register under UK REACH as an OR. However, this would be considered a new registration for the OR. To remove all obligations on the UK importer, the full OR registration would need to be completed, and a registration fee equivalent to those currently levied by ECHA paid, by 26 September 2019. This is a substantial undertaking for the EU supplier, and will incur duplicated registration costs. The supplier may also not have full access to the necessary data.
The final option is notifying under UK REACH, but working on the basis that an OR registration will be completed by the EU supplier before 29 March 2021. HSE guidance indicates that this is possible and that, where an OR registration is completed within the two-year period, the importer will not need to complete its own registration. The OR’s registration would still be considered ‘new’, so fees would be payable.
This could be a sensible compromise position and remove the need for the importer to secure access to data. However, it relies on good faith or a strong contract between the parties, and on the EU supplier being willing to submit and pay for a new registration. If the OR does not complete its registration as planned, the UK importer could lose market access. The importer may also be limited to buying from the EU company the OR represents if it does not proceed with its own registration.
Non-UK companies wishing to supply chemicals into the UK will need to liaise with their UK importers regarding registration options as noted above. If based outside the EU, these companies will have already had to consider REACH and may already have an OR registration in the UK, giving them the option of grandfathering it - and moving their existing REACH OR registration to another OR in an EU-27 country.
Suppliers based in the EU-27 seem to be disadvantaged here. They do not have an existing REACH OR registration that they can grandfather into UK REACH. Like other suppliers, they may want to retain control of the UK REACH registration dossier and data, but may have to pay for and complete a full UK REACH registration within 180 days, or two years if the importer makes the initial notification.
UK REACH: data issues
To complete UK REACH registrations, a full dossier of information and data will need to be submitted within two years of the exit date. The companies obliged to make these registrations may not currently have access to the necessary data.
ECHA has developed a database that includes details of all chemicals registered under REACH. This includes data on chemical names and properties, and registrant companies, plus data extracted from and copies of the dossiers submitted by companies under REACH. Some elements of it are publicly searchable, others are only available on a more limited basis. Amongst other things, it will be protected by database rights and copyright, which ECHA is likely to own.
The UK government initially suggested that it could ‘cut and paste’ data from the REACH database. However, current guidance indicates that companies must provide all of the data. To have copied data, the UK would have needed a licence from the owner. Copying any significant part of the database without one, even just the publicly searchable elements piecemeal, would infringe copyright and database rights. ECHA is under no obligation to grant such a licence.
There could also be similar issues with the templates used to submit dossier data to ECHA. If companies want to submit data to UK REACH using one, that may also require a licence from ECHA, as reproduction of the dossiers could also indirectly involve reproduction of the templates. Dossiers submitted to ECHA will also be subject to copyright and parts may be protected as trade secrets or confidential information. The UK government is asking companies to submit copies of these dossiers to UK REACH-IT, but the companies may not own or have sufficient rights to use this data.
The copyright in each document in the dossier will usually be owned by the entity or entities that created it or possibly by third parties, such as testing houses or consultants engaged to produce reports. In those circumstances, companies’ ability to provide copies to the UK government and permit them to be subsequently copied and published would depend on the scope of their original licence. Copyright owner consent would be needed even if they were only used for submission to ECHA or REACH compliance.
To further complicate matters, there are some data sharing arrangements that are specific to REACH, because joint registrations were encouraged to avoid unnecessary new studies and tests. Many REACH registration dossiers have been developed and submitted by consortia of companies under a joint submission or substance information exchange forum (SIEF) agreement.
Under these, companies grant each other rights to use and refer to the various parts of the dossier, but generally only for REACH purposes. Further use, such as for UK REACH, is often not permitted without the consent of all consortium members. Even if consent is given, we would anticipate additional costs for UK companies that do not own their REACH registration data, either to purchase additional rights to use data in UK REACH or to generate their own studies if necessary.
Conversely, if a UK company owned data but had granted rights to a REACH consortium, it might automatically leave the consortium when the UK leaves the EU. In such cases, the consortium agreement is likely to govern what happens to such existing rights. For example, the data may be irrevocably licensed to the REACH consortium, but the UK company may no longer benefit from future cost sharing or payments for access to it. This would depend upon the terms of individual agreements and could present issues for both sides.
The two main legal issues we have identified in relation to the proposal for UK REACH are:
- The status of EU-27 suppliers to UK companies, who may wish to make an OR registration. This could be in the interests of both sides, but does not benefit from the ‘grandfathering’ provisions;
- Access to data required for UK REACH registrations.
The requirement to submit a full dossier to UK REACH within two years of exit date could lead to significant additional costs for companies who do not own the data associated with existing REACH registrations. If they cannot negotiate access to the existing data, then new and duplicate animal testing would be required, something the REACH regime was designed to avoid.
For more information, please contact:
Squire Patton Boggs
Tel: +44 121 222 3204
Email: [email protected]
David Gordon (by email). Cap – Gordon – No system exists to manage ‘UK REACH’ in a no-deal scenario
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Anita Lloyd (by email). Cap – Lloyd – Several options exist for importers
Adobe Stock 120217696– no cap